Anti-Corruption Campaign and Inter-Generational Transmission of Bureaucracy: Evidence from China

Abstract

Corruption and cronyism lead to misallocations of economic resources and talents and hence are inefficient and unfair. With the recent anti-corruption campaign in China as a quasi-experiment, we investigate how endeavors of counter-corruption affect potential bureaucratic cronyism through the inter-generational transmission. First, we conduct a difference-in-differences analysis to compare changes in the probability of working in bureaucracy after the campaign went into effect in different provincial administrative divisions of mainland China among individuals with a bureaucrat parent to those without. We find that before the campaign, bureaucrats' children were over 13 percentage points (P.P.) more likely to work in bureaucracy and that the positive selection on human capital of bureaucrats' children can explain only 12--24 percent of this discrepancy. However, after the campaign took effect, this advantage significantly reduced by more than 5 P.P. Moreover, we explore potential mechanisms through which anti-corruption diminished the inter-generational transmission of bureaucracy. We provide evidence that the campaign decreased the economic attractiveness of bureaucratic jobs and that better outside options more likely explained the reduced inter-generational transmission. We do not find evidence supporting the channel of the insider information of bureaucrat parents on the campaign. Finally, we find that the effect of the campaign was mainly driven by prime-working-aged people and men.